What to Do When You Can’t Make Your Credit Card Payment This Month
Sometimes the unexpected happens and you can’t make your credit card payment. That’s okay, we all have things to juggle in our budget. However, it’s important to understand exactly what will happen if you don’t make your credit card payment and what your options are.
Options
If you’re running short on money this month and struggling to come up with the funds to make your credit card payment, there are a few routes that you can take.
Skip the payment entirely
The obvious answer is that you could just not make the payment. In some ways, this may be the easiest choice, but it comes with some risks and penalties.
Late fees
Most credit cards charge a late fee if you miss a payment. Each credit card’s fee and terms are different, so you’ll need to look at your credit card documents or your account to see what the late fee is for your card. If you forget to make a payment, you could always call the credit card company to ask for a one-time waiver of your late fee. However, this may or may not work and it isn’t something that you should rely on.
Accrued interest
The higher your balance is, the more you’ll be paying in interest. If you miss a payment and a late fee is added to your balance, this will accrue interest as well.
There is also the risk that your credit card company may charge a penalty APR if you are more than 60 days late with a payment. This is an increase in your interest rate that can last for up to six months. After the six month period is over, the credit card company can review your account and reduce the interest rate.
Credit score
Your payment history can make a significant impact on your credit score. If you miss one payment and make it up within 30 days, you usually won’t see an impact on your credit score. This is because late payments are typically not reported to the credit bureaus that calculate your credit score until the payment is at least 30 days late.
If your late payment is reported to the credit bureaus, you could see the impact of it for years to come. It can stay on your credit report for seven years, though the impact on your credit score can fade over time. The more missing or late payments you have, the more harmful it could be to your credit score.
Lost benefits and rewards
Missed or late payments can also result in losing some of the benefits and rewards of your credit card. This could include promotional rates such as a 0% introductory APR.
Speak with your credit card company
If you know that you’re going to have trouble making your monthly payment, it could be helpful to call your credit card company and explain the situation. Some of them may be willing to work with you by offering you a payment relief program. Each company may handle these types of programs differently, so you should ask about how the program works before you agree to it. Some of the questions you may want to ask include how long the payment relief program can last, if there are fees associated with it, and how interest is handled during the program.
Adjust your payment due date
In some situations, you may be able to relieve the stress of making your payments just by adjusting the due date. This may be a good idea if your bills all tend to be due around the same time, or if your payment date is just before you receive a paycheck.
Debt relief services
If your credit card company isn’t willing or able to work with you on a payment program, you could consider turning to debt relief services.
Credit counseling
A credit counseling organization can give you advice on managing your money and your debts. You can also work with a counselor to develop a budget.
Debt settlement programs
Some companies also offer debt settlement programs. This is when the company will negotiate with your creditor (in this case, your credit card company) to come up with a settlement that will resolve your debt. Instead of paying the full amount of your credit card balance, the company will negotiate a lump sum that will resolve your debt.
Debt relief service companies
Here’s the thing about debt relief services — they can be risky. If you’re seriously thinking about going this route, there are some things that you should know about. The Federal Trade Commission recommends that you check with your state Attorney General and local consumer protection agency before you get involved with any debt relief services. You’ll want to find out if there are any complaints on file about the company that you’re considering doing business with. If your state requires that debt relief companies be licensed with the state, you’ll also want to make sure that it is.
Credit counseling
This is a lower-risk option than some other debt relief services. A reputable credit counseling organization will have counselors that are certified and trained in consumer credit, money and debt management, and budgeting. At the first session with one of these organizations, you can discuss your financial situation and ask for help to develop a personalized plan to help you get out of debt and/or achieve other financial goals. Following that first appointment, you can set up follow-up sessions to report back on your progress and receive continued support.
Debt settlement programs
Debt settlement programs may sound like a huge sigh of relief, but there’s a lot that you need to be aware of if you’re considering this option. Your credit card company may agree to negotiate a settlement on your credit card debt, but it has no obligation to do so.
Debt settlement programs usually advise you on what to do about your credit card while it tries to negotiate for you. In most cases, you’ll be encouraged to stop making any credit card payments. This, of course, could hurt your credit score and make it so that you’re continuing to build up interest and late fees on your credit card. If your credit card account goes to a debt collector, you may start getting contacted by the debt collector for repayment as well. In the worst-case scenario, you could be sued for repayment while the debt settlement program is doing its work.
Most of the time, debt settlement programs require you to deposit money monthly into a special savings account. So even if you’re not making those payments to your credit card company, in a sense you are making some payments. If the debt settlement program is successful in negotiating a settlement for your credit card payments, the money that you’ve deposited into that savings account will be used to make your lump-sum payment. However, if the credit card company doesn’t agree to allow you to settle your debt, you’ve been putting that money aside for nothing instead of using it to make payments on your credit card.
Costs to consider
No matter which route you decide to take, there are various costs to consider.
If you let your credit card balance build up and don’t make your payments on-time, you may have late fees and penalty fees added to your account. You’ll also have more interest accruing, leading to higher interest payments.
If you decide to go the debt relief route instead, you’ll most likely have to pay for your credit counseling or your debt relief program. These costs will vary, so you’ll want to make sure that you ask about the fees up front before agreeing to work with any of those companies. You’ll also want to ask about how much money you would need to put aside monthly to participate in the debt relief program.
When you’re stuck in a bad situation, there really isn’t much that you can do to save money. The best thing you can do is try to work with your credit card company to see if it can offer you any alternative options. It’s better to be upfront rather than doing nothing and missing payments without exploring your options.
Pros and cons of your options
Skipping the payment
- Skipping the payment and not worrying about it is certainly the easiest option.
- By skipping your payment, you’ll likely be charged an additional late fee and maybe even a higher interest rate. Your credit score could also be impacted.
Speaking with your credit card company
- If you call and explain the situation to your credit card company, it may be willing to work with you on a payment program that is more manageable for you.
- There’s no guarantee that the credit card company will work with you on this, and it’s less likely to work if you frequently miss or skip your payments.
Debt relief services
- Working with a credit counselor may be able to help you create a budget and evaluate your financial situation so you can make a plan moving forward. It’s also possible that you could reduce the amount that you end up paying your credit card company in the end.
- Again, there’s no guarantee that your credit card company will negotiate with you to accept a settlement for your credit card debt. You could end up paying more than it's worth by hiring one of these services, and in some cases, the services may not get you very far.
The bottom line
If you find yourself unable to make your credit card payment, there’s no need to panic. Whether this is a one-time situation or an ongoing issue, the first step is to make a plan to address the problem.
A one-time mistake or lack of funds may be able to be easily remedied by making a call to your credit card company. You can also change your monthly due date if it isn’t fitting well into your monthly budget. Or, if all else fails, you can fall behind slightly knowing that you may need to pay a late fee next month.
If this is more of an ongoing issue, there are services out there that may be able to help you get on the right track. In some cases, this might mean credit counseling to help you establish a budget and financial plan moving forward. In other cases, letting a company negotiate a settlement plan can help you get out of the current situation.
No matter what you’re facing, having a plan can allow you to get on a steadier path for the future.
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